Bitcoin

What is Bitcoin?

Bitcoin is created by Satoshi Nakamoto in 2009. Bitcoin is the world’s first cryptocurrency. Since the creation of Bitcoin, hundreds of cryptocurrencies appeared on the market. But despite many improvements over Bitcoin, Bitcoin still remains the number 1 cryptocurrency based on market capitalization by miles.

Mining algorithm

Bitcoin uses the POW (Proof of Work) algorithm. This means that computer power is needed to mine new blocks and validate transactions on the network. At this time of writing, millions of computers and other hardware worldwide are used to mine Bitcoins.

When Bitcoin just started in 2009, it was very profitable to mine Bitcoins with your computer. Nowadays you need to spend thousands of dollars on special mining hardware called ASICs to be profitable in the long term.

The algorithm used on the Bitcoin network is SHA-256. There are many algorithms which affect the way these coins can be mined. You can’t use ASICs to mine other coins unless they also use the SHA-256 algorithm.

Since 2017, Bitcoin uses SegWit in the network. There are more plans to upgrade the network by upgrading the block size. On 31 August 2017, the Bitcoin blockchain experienced a hard fork resulting in a new coin called Bitcoin Cash.

Bitcoin circulation and block info

As time progresses, more Bitcoins are mined. This will continue until the hard cap of 21 million BTC is reached. But when time progresses it becomes harder to mine Bitcoins. There are two main reasons for that:

More people start mining

Block reward is halving every few years

When more people start mining, the difficulty will rise. The mining difficulty is based on the total amount of miners. That also means that if everybody stops mining Bitcoin, it eventually becomes much easier to mine Bitcoins. But this will most likely never happen.

The block rewards are halving every few years. For example, the first Bitcoin halving took place in 2012. In 2011 you would earn 50 BTC if you found a new block. After 2012 you only get 25 BTC if you found a new block.

At bitcoinblockhalf.com you can see how long it will take before the next halving takes place. At this time of writing, the next halving will take place in 1015 days. That means on ~ 17 June 2020 you will earn 6.5 BTC instead of 12.5 if you find a new block.

What can you do with Bitcoin?

Bitcoin is used as a currency. You can use Bitcoin to buy goods or services. But most people use Bitcoins for trading on exchanges. The real world use is very minimal. But this is the case for every cryptocurrency out there.

Bitcoin is still in the startup phase. There is no business in the world that directly accepts Bitcoins as a currency. Because the markets are too volatile. Businesses accept Bitcoins as payment but behind the scenes, every coin will be directly converted to fiat money like dollars or euros.